The commissions, the Supreme Court and the FCA: is the motor finance saga over?

On 1 August 2025, the Supreme Court delivered its hotly awaited decision on whether motor finance lenders are liable to customers for commissions the lenders paid to motor vehicle dealers - Hopcraft and another v Close Brothers Ltd; Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance); Wrench v FirstRand Bank Ltd; (London Branch) (t/a MotoNovo Finance) (Rev1) [2025] UKSC 33.

This Supreme Court decision largely overturns the Court of Appeal decision from last October, which found that the lenders in that case were liable on the basis of the tort of bribery or on the basis of the lenders’ dishonest assistance in the dealers’ breach of fiduciary duty and that Mr Johnson was successful in his claim under the Credit Consumer Act 1974 (CCA). See our previous article here.

The Supreme Court’s decision is, on the primary legal arguments, a resounding win for lenders, as well as for credit brokers in this and, potentially, other sectors. However, the Supreme Court’s decision on the one surviving claim brought under the CCA, in favour of the particular customer, was such that any hopes that this would near eliminate lenders’ exposure were quickly dashed by a weekend announcement from the FCA that it will be consulting on an industry-wide redress scheme with an estimated industry-wide liability of between £9bn - £18bn.

In this article, we explore the Supreme Court’s findings and where the risks may still lie for lenders.

Recap

The case before the Supreme Court related to three claims by customers who purchased used cars from motor vehicle dealers under hire purchase agreements.

As part of those transactions, the customers were looking to purchase cars at an affordable price, with the dealers looking to sell the cars at profit. The dealers also acted as intermediaries to obtain a finance offer as the customers required credit to purchase the car (lenders here were looking to offer finance on profitable terms). Lenders paid the dealers a commission in exchange for the business. The nature of this tripartite transaction was central to the Supreme Court’s findings.

While initially successful, the Court of Appeal, in its October 2024 decision, delivered a shock judgment which found that:

• the dealers owed a disinterested duty to provide, on an impartial basis, information, advice or recommendations on a finance deal which was suitable for the customers’ needs, and the failure to disclose the commission constituted a bribe for which the lenders had primary liability;
• the dealers owed a concurrent fiduciary duty, such that a failure to obtain the customers’ fully informed consent to the receipt of the commission resulted in the lenders having accessory liability for the dealers’ breach of their fiduciary duty; and
• in one of the cases (the only one in which this point was live for consideration by the Supreme Court), there existed an unfair relationship between the lender and customer for the purpose of s140A of the CCA.

The Supreme Court’s judgment

In a relief for lenders, who were facing the prospect that the Court of Appeal’s findings may require them to unwind credit agreements and return all loan repayments to customers, the Supreme Court’s findings mean that lenders will only be liable if the facts of each individual transaction make the relationship unfair (and, in that case, only to the value of the commission paid plus interest).

In reaching that conclusion, the Court provided further guidance on the nature of the relationship between dealers and customers, the scope of the tort of bribery and the factors relevant to determining if the contractual relationship was unfair. That guidance will have relevance beyond motor finance claims and builds on the unfair relationship findings of the Supreme Court in the Plevin PPI case Plevin v Paragon Personal Finance Ltd [2014] UKSC 61.

The Supreme Court identified that the main issue which it regarded as decisive of these appeals (save for Mr Johnson’s CCA claim) was whether any fiduciary duty was owed by the dealer to the customer in connection with providing a finance package as credit broker. This was important because:

• if there is no fiduciary duty owed, the claims in equity against the lenders – secret profit and dishonest assistance – were unsustainable; and
• there was debate as to whether the separate claim in the tort of bribery required a fiduciary relationship to exist to be engaged or whether what has come to be known as a ’disinterested’ duty, although falling short of a fiduciary duty, was sufficient for that purpose.

To answer these questions, the Supreme Court needed to look at the relationship between the dealers and the customers.

Relationship between dealers and customers

The Supreme Court reaffirmed the long-standing position that for a fiduciary relationship to exist, one must undertake a duty of single-minded loyalty to their principal, to act exclusively on their behalf to the exclusion of their own interests. Once established, the fiduciary is subject to both the no-conflict rule and its “twin sister” [68]  – the no-profit rule – these are both equitable rules. Any profit obtained without the fully informed consent of the principal is to be held on trust for the principal, with the fiduciary also liable to any loss caused by the breach. Where a third party materially assisted the fiduciary in breaching the no-profit rule (or the no-conflict rule), they can be liable for dishonestly assisting the breach which carries with it joint liability to compensate the principal for actual loss.

However, the Supreme Court disagreed with the Court of Appeal that there existed a fiduciary relationship between customers and dealers and, therefore, the equity-based claims failed.

Drawing heavily on the tripartite transaction discussed above, the Supreme Court found those features were “incompatible” with a fiduciary duty because:

• at all times, the customer, dealer and lender were acting at arm’s length in pursuit of their own (and, potentially, conflicting) self-interests. Doing so was “irreconcilably hostile to the recognition of a fiduciary obligation” [277];
• the dealers were not facilitating finance as a service to the customer, but to “oil the wheels of what was for [them] essentially a sale transaction from start to finish” (without the finance, the sale would fall over such that the finance was ‘ancillary’ to the sale of the car) [269];
• the dealers gave no express undertaking that they would put their own interests aside, nor did they have authority to act for the customers. Simply offering to find the most suitable finance was insufficient; and
• dependency and vulnerability on the part of the customer are not, alone, indicative of a fiduciary relationship.

Accordingly, the Supreme Court came to the sensible conclusion that the nature of the tripartite arrangement means that:

“Neither the parties themselves nor any onlooker could reasonably think that each of the participants to such a negotiation was doing anything other than considering their own interests.” [268]

Scope of the tort of bribery

While the lenders had proposed that the Supreme Court abolish the tort of bribery altogether, the Court refused.

However, in a win for the lenders, the Supreme Court disagreed with the Court of Appeal that for the tort of bribery to be engaged all that is needed is for the recipient of the bribe to owe a disinterested duty. It was concerned that if bribery remedies were available where that ‘lower’ duty existed, a wide range of people (such as retail staff and waiters who routinely make recommendations while acting in their own interests) could be liable for bribery.

Remedies for bribery are instead only available where the recipient of the bribe owes a fiduciary duty to the claimant, and the bribe is received in breach of the no-profit rule. As there was found to be no fiduciary duty between the dealers and the customers, the claims pursuant to the tort of bribery similarly failed.

The Court made clear this does not leave a gap in the law for non-fiduciary relationships. The law still protects non-fiduciary principals impacted by a bribe through the torts of deceit, conspiracy, inducement of contractual breach and causing loss by unlawful means.

The Court, nevertheless, provided helpful commentary on the tort of bribery more generally, clarifying that:

• for there to be bribery, (1) the motive of the briber is irrelevant; (2) there is no need to establish dishonesty of the briber or recipient, nor reliance by the principal; (3) there is an irrebuttable presumption that the agent was influenced by the bribe and that there has been loss up to the amount of the bribe;
• it is a defence if the principal gives his informed consent to the payment (with the briber or recipient bearing the onus), which requires the full disclosure of all ‘material’ facts;
• what will amount to ‘material’ facts will depend on the circumstances of the case. Partial disclosure is not and never has been enough, but that is not to say that disclosure of every fact is needed;
• the principal can elect at the time of trial between remedies to recover money had and received (that is, restitution) or damages in tort for the actual loss sustained;
• where the bribe related to a contract with the briber, the principal has a common law right to rescind as a self-help remedy subject to counter-restitution (provided it is not too late to rescind, otherwise the contract should be terminated looking forwards only) and a concurrent right to equitable rescission on application to a court.

Unfair relationship guidance

The Court did find that in one of the three cases (the Johnson case), the lender and Mr Johnson were in an unfair relationship for the purposes of s140A of the CCA.

That section permits a court to determine that a relationship between a creditor and debtor arising out of a credit agreement is unfair. Where that is the case, s140B empowers a court to order (among other remedies) the repayment of any amount paid by the debtor. Importantly, this remedy is only available in litigation.

The Court stressed that whether a relationship is unfair is a “highly fact-sensitive exercise”, which will turn on the circumstances of each customer. That is not to say the Supreme Court shied away from issuing guidance for lenders (and, equally, the FCA and claimant firms). In the context of motor finance commissions, factors such as the size of the commission against the credit charges, the nature of the commissions, a consumer’s characteristics, the extent and manner of disclosure, and compliance with regulatory requirements will all be (non-exhaustively) relevant to considering unfairness.

In the Johnson case, the Supreme Court agreed with the Court of Appeal, but for different reasons, that the relationship between Mr Johnson and FirstRand was unfair within section 140A of the CCA and the commission should be paid to Mr Johnson with appropriate interest. Relevant circumstances in Mr Johnson’s case were:

• the high commission paid to the dealer (55% of the total charge of the credit, comprising of interest/fee charges on the loan), combined with the customer’s need for finance to purchase the car and the lender’s evidence that the commission would have been recovered via the loan charges, was a “powerful indication” of unfairness;
• the commercial relationship between the lender and dealer was also “highly material”. It was represented to the customer that the dealer would select offers from a large panel of lenders from which the most suitable deal would be selected, when in fact the dealer had agreed that the particular lender would have the first right of refusal for all finance offers; and
• while the customer failed to read any of the loan documentation, the clause which disclosed that a commission may be paid, was neither prominently displayed in those terms nor drawn to the customer’s attention (whilst a term unrelated to commissions was drawn to the customer’s attention).

Where to next?

With the Supreme Court leaving the only avenue for recovery down to an individualised fact sensitive enquiry, the judgment creates challenges for customers wishing to pursue litigated claims. Not only will the unfairness depend on individual circumstances, but costs may quickly outweigh the remedies.

That does not mean that the end of the motor commissions saga is upon us.

FCA redress scheme inbound

The FCA review of motor finance agreements, of course, commenced in January 2024 with the possibility of redress a stated possibility from at least July 2024. Further to the Supreme Court judgment, the FCA has confirmed it will consult in early October 2025 on an industry-wide statutory redress scheme, which is expected to launch in 2026.

Points on which the FCA will be consulting include, whether to extend the scheme across both discretionary and non-discretionary commission arrangements from 2007 to 2021, guidance for identifying unfair arrangements, and a methodology for calculating redress payments (plus ballpark interest of 3% p.a.). The FCA estimates lenders could be on the hook for between £9bn - £18bn in payments and costs.

Given the Supreme Court’s fact sensitive conclusions, we would not be surprised if the FCA attempts to simplify the exercise by setting minimum thresholds above which unfairness will be established.

FOS

The FOS is yet to announce how it will approach the large volumes of complaints currently sitting with it in light of the judgment, with it also awaiting a (postponed) appeal hearing on a judicial review of one of its previous motor finance decisions (R (Clydesdale Financial Services Ltd) v Financial Ombudsman Service Ltd [2024] EWHC 3237 (Admin)).

With the FOS not bound to follow the law (including case law – it decides cases on what is ‘fair and reasonable in all the circumstances’), and likely to have greater regard to the Consumer Credit Sourcebook (CONC), this could remain an area of risk for lenders, particularly in cases which have unique unfairness characteristics. The FCA’s impending redress scheme and extended deadlines for FOS referrals should, however, reduce the current burden on the service.

Claimant firms and claims management companies (CMCs)

Do not forget the advertising blitz of CMCs and some claimant law firms promising thousands in payouts for customers who sign up. The FCA and Solicitors Regulation Authority (SRA) have been in contact with firms and CMCs to make plain their concerns (SRA press release; FCA letter) as well as taking action to have certain financial promotions amended or withdrawn.

While the judgment (with its focus on individual customer circumstances) will likely make any group litigation more difficult, and the anticipated FCA redress scheme will likely remove the most egregious cases from the claimant pool, we cannot rule out further group litigation being commenced (eight lenders are already party to one set of proceedings).

With the FCA to consult on whether the redress scheme should be an opt-in/opt-out model, claimant firms/CMCs may continue to encourage customers to pursue complaints to lenders and the FOS, notwithstanding that those customers may otherwise receive redress without having to take any action. To that end, the FCA has already advised customers that they do not need to take any positive action on their part at this stage. That advice may help alleviate the risk of further group litigation being commenced.

Final thoughts

Overall, therefore, the Supreme Court judgment brings welcome clarity on the existence and implications of fiduciary obligations and closes the door to broader equitable remedies. However, as we have shown, lenders have certainly not been ‘let off the hook’ and may still face a range of exposures, further clarity for which is still to emerge over the coming months.